Self-employed retirement plans Bakersfield, CA. The flexibility of being your own boss in Bakersfield, CA is one of the greatest advantages of being self-employed. Even so, this freedom can come with certain challenges, particularly when it comes to building your retirement fund, because you don't have the option of employer-sponsored retirement plans. Only 13% of self-employed individuals have a workplace retirement plan, although many could benefit from looking into other possibilities. In addition to achieving a financially stable retirement, working with a financial advisor in Bakersfield, CA to establish your self-employed retirement plan delivers significant tax advantages that allow both you and your business to thrive.
Few Bakersfield, CA financial advisory and retirement planning firms are as attuned to the requirements of self-employed individuals as well as Correct Capital. Our founder's father was a small business owner himself (check out our story here), and our firm have a rich history of assisting business owners in their retirement planning needs. We know that your professional and personal aspirations go far beyond just monetary concerns, and we work tirelessly to provide personalized solutions to meet your unique goals. Keep reading to learn more about your self-employed retirement plan options in Bakersfield, CA, or give us a call at Correct Capital at 877-930-401k or contact us online to talk to a entrepreneurial financial advisor in Bakersfield, CA today.
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Why Bakersfield, CA Self-Employed Individuals Should Have a Retirement Plan
Retirement plans for self-employed individuals not only prepare you for the future, they also provide tangible benefits today. With customizable contribution options to substantial tax savings, partnering with a financial advisor in Bakersfield, CA enables you to design your retirement plan to fit your unique financial situation.
Flexibility That Fits Your Income
If your income changes over time, a plan like a SEP IRA or Solo 401(k) provides the freedom to adjust how much you save:
- Customizable Contributions: Contribute more during profitable years and scale back when your earnings dip, so that your plan fits your cash flow.
- Roth Options: Opting for a Roth Solo 401(k) lets you settle taxes at the time of contribution, enabling you to withdraw tax-free later—an advantageous choice if you anticipate your tax rate to be higher in the future.
Save Money on Taxes
Plans designed for the self-employed provide valuable tax benefits:
- Tax-Deductible Contributions: Contributions to a SEP IRA lower your taxable income, allowing you to keep more of your earnings.
- Tax-Deferred Growth: You won't pay taxes on investment growth until you withdraw it, which gives your money more time to grow.
- State-Specific Incentives: In some states, you might access state-specific deductions as a self-employed individual. These local incentives help make these plans even more beneficial.
- Retirement Savings Contributions Credit (Saver’s Credit): Eligible individuals can apply for a credit of up to 50% of the first $2,000 contributed a retirement plan, helping to lower your tax bill even more.
Protect Your Savings With Smart Investments
Planning for a safe retirement goes beyond just how much you save—it’s also determined by your investment strategy:
- Diversified Portfolios: Allocating your investments across a mix of asset classes like stocks and bonds can help mitigate financial risk while helping to grow your retirement fund.
- Emergency Back-Up: Combining your retirement strategy and a business emergency fund ensures you don’t tapping into your nest egg during tough times and risking extra costs.
Plan for the Future of Your Bakersfield, CA Business
A thoughtful retirement strategy can assist you prepare for what’s next with your Bakersfield, CA business:
- Selling Your Business: If you’re planning to sell, accounts such as SEP IRAs or Solo 401(k)s remain yours and don’t transfer with the business. These accounts offer the financial stability you’ll need later on. Keep in mind that while the sale of a business usually creates a capital gain, deposits into these plans are restricted by contribution limits (e.g., as much as $7,000 for IRAs or up to $70,000 for Solo 401(k)s, including catch-up contributions, according to plan rules).
- Minimizing Taxes: Strategically planning your contributions minimizes the taxes you might face when you sell your business.
- Succession Planning: Whether you’re transferring ownership, your retirement savings offer a stable foundation during the change. You might want to work with a financial advisor with expertise in succession and retirement planning to help with taxes during the sale.
With the proper savings strategy, you can take control of your financial future, lower your tax bill, and establish a solid base for both your retirement and your business goals.
Why Start a Self-Employed Retirement Plan in Bakersfield, CA Now?
Time remains one of the most important assets in retirement planning. Beginning sooner rather than later not only helps you grow a bigger financial cushion but also minimizes the pressure of catching up later in life. The following are reasons why it is beneficial to start now:
The Cost of Waiting
Delaying your retirement savings may cause a substantial impact on the amount you’ll have when you reach retirement age. The main reason is compound interest—the financial principle where your investments earn returns, and those returns, then, generate even more returns. The more time your money has to grow, the greater the effect of compounding.
Example: Two individuals, Alex and Taylor are both self-employed professionals. Their shared goal is to save $500,000 for retirement by age 65:
- Alex begins contributing $5,000 annually at age 30.
- Taylor waits until age 40 but puts away $7,500 annually to bridge the gap.
By age 65, assuming 7% annual return:
- Alex invests $180,000 and achieves a total of $691,184.39*.
- Taylor contributes $195,500 but accumulates just $474,367.78*.
How Early Contributions Grow
Regular, modest investments made consistently often create impressive growth. Consider this example showing the effect of consistent growth:
- Starting at age 25: By investing $200 per month in a retirement plan with an projected return of 7%, you’ll grow to approximately $497,303.29* by age 65.
- Starting at age 35: Saving the same $200 per month leaves you with only $235,412.97* by age 65—a gap of over $260,000, simply due to a 10-year delay.
The earlier you begin, the less you need to save each year to achieve your retirement goals.
*These calculations represent estimates derived from NerdWallet’s Compound Interest Calculator, assuming a 7% annual return. Annual deposits were multiplied by the number of years to estimate total contributions. The scenarios provided are for illustrative purposes only and cannot predict actual future outcomes. Actual results may vary due to elements like market conditions, fees, and your unique situation. Be sure to speak with a financial advisor for personalized advice.
Take Control of Your Financial Future
For self-employed individuals in Bakersfield, CA, it is often the case that you put more emphasis on reinvesting in your business over saving for retirement. Even so, initiating a plan now gives you the chance to:
- Take advantage of tax-deferred growth or tax-free withdrawals later on.
- Enjoy contribution flexibility that adapt to your cash flow.
- Build a long-term safety measure that provides security, no matter how your business changes.
The sooner you start, the less you’ll have to worry about playing catch-up later in life. Taking steps toward your retirement goals today means managing your financial future and allowing yourself the opportunity to turn your attention to your dreams—both for your future retirement and your Bakersfield, CA business.
Types of Self-Employed Retirement Plans
A variety of retirement savings options available for entrepreneurs in Bakersfield, CA, each providing its own advantages and considerations. A financial advisor can help you evaluate the advantages and disadvantages of each choice and choose the one most suitable for your circumstances. In most cases, your self-employed retirement plan options in Bakersfield, CA include:
Traditional or Roth IRA
Plan Overview: IRAs, or Individual Retirement Accounts, are long-term savings plans that include key tax perks. In a traditional IRA, you can usually deduct your contributions from taxable income, and returns grow free of current taxes, but retirement distributions are subject to income tax. In contrast, Roth IRAs require contributions are made with after-tax income, but eligible distributions during retirement, including earnings, are tax-free. In both accounts, withdrawals don’t incur penalties as long as you are at least 59½.
Eligibility: While many retirement plans, such as 401(k)s, are tied to employment, traditional and Roth IRAs are accessible for individuals with taxable earnings.
Contribution Limits: For 2025, annual contribution limits for IRAs are capped at $7,000, or $8,000 if you're 50 or older.
Simplified Employee Pension Plan (SEP IRA)
Plan Overview: The Simplified Employee Pension IRA serves as a retirement savings option that permits self-employed individuals to set aside a portion of their self-employment income. Contributions are strictly employer contributions an employer, so, as a sole proprietor, you (the employee) are limited to contributions from the employer role beyond the 25% you (the employer) allocate. If you have employees, you are obligated to contribute the same amount for them as you do for yourself. You have the flexibility to contribute a flat-dollar amount or a percentage of wages to employee accounts. This type of plan is a good option for businesses that experience periods of inconsistent earnings. In contrast to some alternatives, SEP IRAs are free of costly startup or administrative fees.
SEPs function like traditional IRAs, where contributions are made with pre-tax money and money withdrawn is subject to income tax.
Eligibility: Both employers and self-employed individuals can open a SEP.
Contribution Limits: Contribution limits for employees in a SEP IRA are the lesser of:
- 25% of compensation, or
- $70,000 for 2025
As a self-employed person, the contribution you can make is based on a special calculation.
Solo 401(k)
Plan Overview: The Solo 401(k), also called an Individual 401(k) or one-participant 401(k) plan, is a retirement savings plan meant for businesses without employees or where the only employee is a spouse. These plans are similar to standard 401(k) plans, and allow you to contribute as both the employer and the employee with pre-tax money. This provides more savings versus SEPs or IRAs; however, the increased savings potential can be balanced by more restricted investment choices. With this type of plan, you can make either traditional or Roth deferrals, which have the same tax benefits as their IRA contribution counterparts.
Eligibility: Only business owners and their spouses can set up and contribute to a solo 401(k).
Contribution Limits: If you are self-employed with a solo 401(k) plan, you are allowed to make two types of contributions:
- Elective deferrals (as an employee) of up to 100% of your self-employment income, capped at the annual contribution limit. In 2025, those limits are $23,500, or $31,000 for those aged 50 and above, or $34,750 if you attain age 60-63 in 2025.
- Profit-sharing contributions (as an employer) cannot exceed 25% of your adjusted self-employment income, which is your net profit minus half of your self-employment tax and the elective deferrals you made.
The total contribution cannot exceed $70,000, or $77,500 for individuals aged 50+ (for 2025), $81,250 if you attain age 60-63 in 2025.
Individual Defined Benefit Plan
Plan Overview: Defined benefit plans offers a structured retirement solution that guarantees a pre-established payout to business owners upon retirement. As opposed to defined contribution plans, this plan is not influenced by market performance, but enables participants to determine exactly how much they'll have in retirement. This plan is best suited for wealthier professionals who aim to accumulate a significant sum for retirement and are willing to make larger deposits. Contributions are tax deferred, and withdrawals are taxed as income in retirement.
Eligibility: Entrepreneurs operating a solo business or employing fewer than five people can open an individual defined benefit plan, but it's generally recommended for individuals aged 50+ who generate a minimum of $250,000 yearly. In most cases, good candidates for defined benefit plans tend to be:
- Partners or owners who want to invest more than $70,000 (or $77,500 if over age 50)
- Companies already contributing 3-4% with plans to contribute more
- Organizations with proven consistent profit patterns
- Partners or owners over age 40 who desire to "catch up" or boost savings within a short timeframe
Contribution Limits: The cap on contributions must be determined by an actuary using your earnings, age, and retirement objectives. Limits on contributions are updated yearly.
The Importance of a Financial Advisor in Bakersfield, CA for Your Self-Employed Retirement Plan
Partnering with an advisor in Bakersfield, CA focused on self-employed retirement strategies is an essential partner for entrepreneurs. They have the expertise to help guide you through the challenges of retirement planning and design a customized plan that aligns with your goals. A financial advisor in Bakersfield, CA will assess where you stand financially, determine how much risk you’re comfortable with, and assist you in making informed decisions about saving and investing for retirement. Included in what we do for you includes:
- Assist in selecting a plan that aligns with your objectives and circumstances
- Customize the plan to fit you personally even further
- Adopt a written plan in accordance with IRS guidelines
- Organize a trust plan to manage your assets
- Help you understand the plan's terms
- Monitor and adjust your plan to keep it aligned with your goals
- Provide ongoing education and advice as you continue on the road to retirement
- Increase your retirement income by maximizing your social security benefits
Self-Employed Retirement Plans in Bakersfield, CA: Correct Capital's Process
Entrepreneurs in Bakersfield, CA who aren’t equipped with the time or understanding to handle their retirement savings strategy independently may end up overwhelmed by their available plans. With Correct Capital, our Bakersfield, CA financial advisors handle the majority of your savings plan setup for you, to help make meeting your retirement goals as hassle-free as possible for you. We can help you get set up your self-employed retirement plan in four simple steps:
- Schedule a Call: It only takes 20 minutes, a member of our advisor team can help understand if we're suited to your needs for you and your business. This brief introduction allows us to understand what you're looking for with no pressure or extensive time commitment on your part.
- Gather Information: Once we mutually decide to continue, we'll request information, including how many employees you have (if any), your present financial standing, and your future objectives. This allows us to put together a tailored approach that aligns with your goals.
- Review Your Plan: When we finalize a plan using the information you provide, we'll schedule a meeting and go over your plan thoroughly to ensure you understand it and show how it aligns with your goals.
- Implementation and Monitoring: After we agree on your plan, we'll put everything in place so you can initiate your savings journey. Throughout our relationship, we'll meet with you and track your progress to ensure it stays suited to your needs.
Our Bakersfield, CA financial advisors and retirement plan consultants are fiduciary advisors, which means they are legally and ethically bound to prioritize your needs above all else.
Other financial advisory services we offer in Bakersfield, CA include:
- 401(k) Audit
- High-Net-Worth Wealth Management
- Retirement Planner
- Financial Planning
- Retirement Plan Consultants
- Fiduciary Financial Advisor
Call Correct Capital for Your Self-Employed Retirement Plan in Bakersfield, CA
To you, your business is more than "just a business", and your Bakersfield, CA financial advisors should provide more than basic financial recommendations. With Correct Capital, we make it a priority to understand our clients and their businesses to create personalized self-employed retirement plans. We offer all our Bakersfield, CA clients our I.O.U. promise: all of the advice you get from us will be independent, objective, and unbiased. To begin on your self-employment retirement plan, reach out to Correct Capital at 877-930-401k or contact us online.
